Westminster did not take the Metropolitan police inquiry into allegations of cash for peerages seriously when it began well over a year ago.

The fact that two Scottish Nationalist MPs had brought in the police was seen as a political ploy rather than a serious corruption investigation. But in March 2006 Tony Wright, Labour chairman of the Commons public administration committee, decided that the allegations that peerages had been offered to party donors should become part of a wider ethics inquiry.

"We will be hearing from those charged with scrutinising nominations to ensure that there are robust safeguards against honours for sale," they said.

Eight days later the committee announced it would be summoning two of the donors, Chai Patel and Sir David Garrard and calling Tony Blair's chief fund raiser, Lord Levy, to give evidence in May. Two other donors, Sir Gulam Noon and Barry Townsley, were also to be called.

John Yates, the Met officer in charge of the investigation, went over to the Cabinet Office to demand that Mr Wright call off the inquiry immediately.

One senior civil servant said: "They pointed out that this was a serious police investigation. They demanded that we told Mr Wright to call off his investigation because it would interfere with witnesses and potential suspects. They were told the Cabinet Office had no authority to stop Mr Wright."

Mr Yates rang Mr Wright in Sweden to ask him to halt the hearing. He refused unless the police could say someone could be charged.

A compromise was sought, and after a tense meeting with Mr Yates MPs agreed to postpone calling the donors. On March 30 the police announced they were widening their inquiry to other parties. Two weeks later they arrested Des Smith, a head teacher involved in the government's city academics project. He protested his innocence vigorously.

By May, when Lord Levy was originally meant to give evidence to MPs, police had seized up to 1,000 documents, files and emails, starting with all the files on the donors held by the House of Lords Appointments Commission. Scotland Yard then removed files from the Cabinet Office and Downing Street. It emerged that police had bought some powerful software from the United States to search computer hard drives for deleted material.

By July, apparent lack of progress led MPs to press for the re-opening of their inquiry, and the arrest of Labour's chief fundraiser Lord Levy on the eve of a further meeting with Yates was seen as a "PR move".

In September Labour lender Sir Christopher Evans was arrested and bailed and Mr Blair's aide Ruth Turner was questioned. It emerged that four Tory donors had also been questioned.

By November Yates said 90 people had been interviewed, and it was a twin track inquiry - looking into cash for peerages and whether the parties had broken electoral law by taking uncommercial loans.

The following month he interviewed Tony Blair: the first time a prime minister had been questioned in connection with a police inquiry - although Downing Street stressed he was a witness, not a suspect.

By January, Labour anger at the length of the investigation was mounting. Ms Turner was arrested before dawn and questioned on suspicion of perverting the course of justice. Senior Labour figures expressed anger at the "heavy-handed" police treatment.

At the end of the month, Lord Levy was re-arrested and questioned for several hours on suspicion of conspiracy to pervert the course of justice. Mr Blair was questioned again the next day. The CPS said Mr Smith would not be charged, but Ms Turner was re-interviewed.

The same month, the Guardian won a legal battle allowing it to report that Ms Turner had written of her concern that Lord Levy had put to her a version of events which she believed to be untrue. He denied any wrong-doing.

The attorney general obtained an injunction preventing the BBC from making similar allegations.

Last night it emerged that the Crown Prosecution Service was to announce no-one will be charged with any offences.